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This juice is a shop that sells smoothies in a university town. The shop hires college students to make smoothies for customers. The inputs are blenders, refrigerators, and student workers. The number of blenders and refrigerators cannot be changed in the short run.
The following table shows the output from varying the number of workers. Use the data to answer the following question.
See table below hosted by imageshack
http://img141.imageshack.us/my.php?image...
True or False: Because marginal physical product is positive in this example, there is no evidence of diminishing marginal returns
Diminishing marginal returns?
False. Marginal product is the change in total product from adding another unit of labor. Here, as labor goes from zero units to one unit, output goes from zero units to 120 units, so the marginal product of this first unit of labor is 120 units of output per unit of labor. The second unit of labor increases output by only 100 units (i.e., from 120 to 220 units), so the marginal product of the second unit of labor is only 100 units of output per unit of labor. So the marginal product of labor begins to fall at this second unit of labor.
Diminishing marginal returns?
it is false. The total output is increasing in a decreasing rate. That means the marginal return is diminishing.
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